Correlation Between Fortress Transp and Willis Lease

Can any of the company-specific risk be diversified away by investing in both Fortress Transp and Willis Lease at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fortress Transp and Willis Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortress Transp Infra and Willis Lease Finance, you can compare the effects of market volatilities on Fortress Transp and Willis Lease and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fortress Transp with a short position of Willis Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortress Transp and Willis Lease.

Diversification Opportunities for Fortress Transp and Willis Lease

0.88

Correlation Coefficient

Fortress Transp  Willis Lease

Very poor diversification

The 3 months correlation between Fortress and Willis is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transp Infra and Willis Lease Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willis Lease Finance and Fortress Transp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fortress Transp Infra are associated (or correlated) with Willis Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willis Lease Finance has no effect on the direction of Fortress Transp i.e., Fortress Transp and Willis Lease go up and down completely randomly.

Pair Corralation between Fortress Transp and Willis Lease

Given the investment horizon of 90 days Fortress Transp is expected to generate 1.7 times less return on investment than Willis Lease. But when comparing it to its historical volatility, Fortress Transp Infra is 1.45 times less risky than Willis Lease. It trades about 0.22 of its potential returns per unit of risk. Willis Lease Finance is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9,463  in Willis Lease Finance on September 5, 2024 and sell it today you would earn a total of  11,158  from holding Willis Lease Finance or generate 117.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fortress Transp Infra  vs.  Willis Lease Finance

Fortress Transp Infra

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transp Infra are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Fortress Transp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Willis Lease Finance

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Willis Lease Finance are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Willis Lease exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortress Transp and Willis Lease

The main advantage of trading using opposite Fortress Transp and Willis Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortress Transp position performs unexpectedly, Willis Lease can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Willis Lease will offset losses from the drop in Willis Lease's long position.

The idea behind Fortress Transp Infra and Willis Lease Finance pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.